Chartered Sem - WACC Analysis

Chartered Sem (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Chartered Sem's Analysis

What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine Chartered Sem's investment risk. WACC Formula = Cost of Equity (CAPM) * Common Equity + (Cost of Debt) * Total Debt. The result of this calculation is an essential input for the discounted cash flow (DCF) analysis for Chartered Sem. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in Chartered Sem before they make value investing decisions. This WACC analysis is used in Chartered Sem's discounted cash flow (DCF) valuation and see how the WACC calculation affect's Chartered Sem's company valuation.

WACC Analysis Information

1. The WACC (discount rate) calculation for Chartered Sem uses comparable companies to produce a single WACC (discount rate). An industry average WACC (discount rate) is the most accurate for Chartered Sem over the long term. If there are any short-term differences between the industry WACC and Chartered Sem's WACC (discount rate), then Chartered Sem is more likely to revert to the industry WACC (discount rate) over the long term.

2. The WACC calculation uses the higher of Chartered Sem's WACC or the risk free rate, because no investment can have a cost of capital that is better than risk free. This situation may occur if the beta is negative and Chartered Sem uses a significant proportion of equity capital.